Novice traders are always facing big challenges in the trading industry. They are struggling to protect their trading capital. Even after learning the basics of this market, they fail to manage the risk exposure since they don’t have any control over their emotions. Usually, they take trades with high risk since they think it is the only way to earn more. By doing so, they blow up their trading account in a short time.
To protect your capital, you should be following some strategic steps. In this article, we will discuss the top five tips you can employ to protect your capital and earn a decent amount of money.
Lower the leverage
You need to trade with a low leverage trading account to keep your fund safe. You might be a disciplined trader, but if you use leverage, after losing a few trades you will start taking emotional trades. The majority of rookie traders use an aggressive method to recover their losses. But if they had kept the leverage low in their trading account, they would not have the ability to trade with high risk. So, to keep your fund safe, it is better to trade with a low leverage account.
Trade with stop loss
Many novice traders never like the concept of stop loss. Professional traders at Saxo Bank always consider stop loss as one of the best ways to keep their risk exposure low. If you want to keep your fund safe, you must learn to take the trades with low risk. The only way you can limit the risk factor is by using the stop loss. Before you execute a trade, you should determine the amount of money you may lose from that certain trade. Stop taking trades with more than a 2% risk as it will make things worse and place you in a very uncomfortable situation.
Use a well-balanced trading strategy
Being a full-time trader, you should always use a well-balanced trading strategy. People who intend to trade the market without using a proper trading strategy tend to make more mistakes. They deal with big lot sizes and eventually blow their account. But try not to copy an expensive or a professional trader’s trading methods. Use the paper trading account to develop your trading method by doing the hard work. Keep the steps simple so that you don’t have to lose a big sum of the money in the real market. Never trade the real market unless you know your system is well balanced. Take your time and back-test your trading strategy in the paper trading account.
Trade with price action strategy
After learning to use a professional trading strategy, you should learn about the price-action trading system. The price action trading system is based on the Japanese candlestick patterns. The retail traders use different forms of the Japanese candlestick patterns and find reliable trade signals at the key support and resistance level. Knowing about the price action signals at the initial stage is going to be a big challenge as you have to learn many new things. So, we suggest using the demo account as it will make the learning process easier. Try to take things seriously while using the practice trading account.
Learn to analyze the news
Very few traders rely on the major news. People often think technical analysis is the best way to become a successful trader. But if you have a look at the profitable traders, you will be surprised to find their depth of knowledge of fundamental analysis. Learn the basics of fundamental analysis and try to integrate it into your trading system. Soon, you will become comfortable with the trading method. At times, you might have trouble analyzing the news data and that is normal. In such a situation, you should avoid taking trades.
Also Read: The Growth And Future Of Algorithmic Trading